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  • Deposit Protection

    Deposit replacement is here - Zero Deposit



    Property Tribes is pleased to welcome Zero Deposit as a commercial partner.

    Deposit replacement discussions have been popping up on the forums in recent times, as the concept gains traction in the market place.

    Deposit replacement means that tenants are able to buy an insurance policy in lieu of a deposit.

    Zero Deposit is the leading scheme and was formed by some industry heavyweights, including Jon Notley, former Commercial Director of Zoopla, who are also backers of the company.

    Deposit replacement has many attractive benefits to landlords, including the following:

    >  As it is not a cash deposit, Zero Deposit does not fall under existing tenancy deposit regulation - so no prescribed information, no protecting the deposit within a certain time-frame.  This reduces the risk for landlords, as they do not become exposed to risk through non-compliance.

    >  Zero Deposit has found that advertisements offering this option attract up to 26% more click-throughs to the listing, giving a greater pool of tenants to choose from.

    >  As tenants only have to find one week's rent for the policy, it makes renting more affordable, and they can move more quickly, even if they have a traditional deposit tied up in their previous rental home.

    >  Zero Deposit has been found to reduce the rate of "rent skipping" at the end of a tenancy, which occurs when tenants do not pay the last month's rent, believing that the deposit will cover it.

    In this in-depth interview, Zero Deposit CEO Jon Notley discusses how his fully regulated deposit replacement product can provide the equivalent protection to a traditional deposit, and help landlords rent their properties faster.


    FIND OUT MORE ABOUT ZERO DEPOSIT

    As mentioned in the video,  Zero Deposit is regulated by the Financial Conduct Authority and is backed by the world’s second largest insurance company Munich Re.

    TDS will be providing dispute resolution services.

    Steve Harriott, group chief executive of TDS, said:

    “While deposit protection is the core of TDS’s business through our insured and custodial schemes, we recognise the merits of a different kind of scheme where no deposit is taken and one that addresses the affordability/mobility issues that may arise with deposits.

    “Whatever option tenants, landlords and agents choose, we are determined to ensure that claims can be assessed with impartiality and professionalism.

    “Our experience of dispute resolution and the robust procedures that we follow make us well placed to support this new direction in tenant deposit replacement.

    “We chose to partner with Zero Deposit as it is a credible scheme with a number of agents already committed as launch partners. It has raised a significant sum of money in start-up capital and has the backing of Munich Re as the insurer.

    “We feel that Zero Deposit’s ethos mirrors our own: their approach is open and transparent for tenants and provides assurance to landlords that they will be able to claim for any losses.”

    FIND OUT MORE ABOUT ZERO DEPOSIT

    SEE ALSO  -          Zero Deposit Schemes

    UP NEXT -              Zero Deposits and Flatfair

    DON'T MISS -         Agent trying to charge monthly no deposit fee

    NOW WATCH:

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    Can you clarify whether this is definitely NOT going to be caught under the 'no admin fees' umbrella? If a landlord said to a tenant,

    "I don't take a deposit but I will buy insurance against you causing problems instead, which you must pay £100 for upfront"

    then this would be an admin fee. Also, the 'websplanation' for tenants on zerodeposits.com  says there is a "£26 annual admin fee payable by DD on the first anniversary ". 

    Plus, having a month's money at risk is an incentive to behave, a forgone week's rent is a sunk cost and once spent is no incentive for the tenant whatsoever.

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    Thank you for your question and for seeking clarity.

    It is the tenant who buys the policy, not the landlord.

    The issue of the tenant "having no skin in the game" was addressed at some length in the video.

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    I have been using a ‘No Deposit’ option for a few years.

    Standard tenancy =

    1 months rent & 1 months deposit

    my ‘No Deposit’ scheme =

    No Deposit but 10% extra per month on the rent.

    So only 1 months rent +10% to move in

    (NLA told me it was ok!)

    its a ‘Win-Win’

    tenants get a nicer place to live in for less money upfront.  

    ( upfront money is a big problem for renters )

    I POTENTIALLY  earn more per month but take the lion share of the risk for rent arrears!!

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    So is the amount they will be payable out limited to how much the deposit would have been?

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    The Zero Deposit Guarantee pays out up to 6 weeks rent - covering 6 weeks liability in the same way a 6 week cash deposit does.

    In answer to @dp1,  it's always offered as a choice/option to the tenant, so not a condition of the tenancy and not restricted by the fees ban.

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    Not all deposit replacement schemes are created equal.

    ARLA Propertymark has warned members to ensure they do their due diligence on deposit replacement schemes.

    Several deposit-free or replacement schemes have emerged in recent years and providers are pitching themselves to agents as a way to earn commissions or provide extra service to tenants and landlords once the fee ban comes in from June.

    An ARLA Propertymark document, seen by EYE, said these schemes “purport to offer faster on-boarding of tenants, fewer voids and potentially less hassle when tenants move out,” but said the model is still “relatively unproven”.

    The update said: “Deposit-free schemes are relatively unproven as businesses, and while the early-to-market providers have a few years of experience, several have only recently launched.

    “As such, agents who decide to include a deposit-free offering in their business should be careful when choosing their preferred partner.

    “Agents should be aware of the potential risks involved in participating in deposit-free schemes and should look carefully at the protection offered and specifically the consequences should their provider fail, and their landlords are potentially no longer protected.

    “Agents should also check the small print of any scheme to make sure there are no exclusions or conditions that could limit the protection offered.”

    Members are also reminded that this can only be offered as an optional replacement to alternative deposits or they could fall foul of the tenant fee ban and face fines.

    The note suggests agents consider if a scheme is regulated by the Financial Conduct Authority, which requires staff to follow certain standards and to have adequate working capital.

    Similarly, ARLA Propertymark says agents should check if the product is protected by the Financial Services Compensation Scheme (FSCS).

    Full/source article

    Property Tribes partner Zero Deposit is a member of both regulatory bodies.

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    Can zero deposit tell us under which clause of the Tenant Fee Act this third party contract will be permitted

    (since generally requiring a 3rd party contract as a condition of granting a tenancy will also be banned)

    - and full details of the legal opinion they have sought on this.

    (I can guess which clause it is - but want to see the legal opinion they have had on it to confirm my thoughts on it)

    https://services.parliament.uk/Bills/201...tfees.html


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    DISCLAIMER just my personal opinion - for legal advice consult a qualified professional grown-up.

    Zero Deposit, 12 months since its launch in February 2018, today reports a record number of agents has joined its partner network, with numbers accelerating as the 1st June 2019 deadline approaches for the introduction of the Tenant Fees Bill.

    The latest signings include an impressive roster of influential regional independent agents, all of whom have a major footprint in their markets, including Dacre, Son & Hartley (Yorkshire), Kings Group (London & Home Counties), Andrew Craig (North East), Keatons (London), Moginie James (South Wales), Michael Poole (Teesside), Paramount (London), Pedder, (South East London) Watsons (Norfolk) and Northfields (West London), among many other new agent launches.

    Jon Notley, co-founder & CEO of Zero Deposit said:

    “A year on from our launch, we are delighted with the progress that we have made in all segments of the letting agency market and the quality of agents that we are attracting to our network. We now have more than 1,300 agent offices live and this number is growing every week as landlords and tenants become increasingly aware of the deposit replacement option that we can provide.”

    “Our message is clear. If agents are going to offer a deposit replacement to their tenants, it is vital that they put the best possible protections in place for their landlords. We believe that this includes ensuring that your chosen product is regulated by the FCA, with all of the associated safeguards.”

    Patrick McCutcheon, Head of Residential at Dacre, Son & Hartley said:

    “We have been carefully considering the deposit replacement market and completed a comprehensive review of the options out there. It was clear to us that Zero Deposit was the best for Dacres in terms of security and the overall quality of the product. It is a big step to replace cash deposits with a scheme, so making the right choice is essential.”

    Richard Palfreeman, Chief Executive of Northfields added:

    ​ “We are delighted to make Zero Deposit available to our customers.  With deposits set to be capped at five weeks rent from June, Zero Deposit gives us a way to extend cover for our landlords without creating unnecessary risks and well as a new revenue stream for Northfields.”

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    For years, both prior to and after the government put their big boot-in regarding deposits, I had stopped taking deposits anyhow so deposits where not essential to me, however; over the last year I now use Rentguard, for their rent guarantee, and I have learnt at my cost that their criteria insist upon taking a deposit equal to at least one months rent or the insurance is invalid,

    Such a stance is unwarrented in my mind the lack of or less of a deposit, has no bearing upon them or the rent they are covering.

    Needed less to say I am not overly impressed by Rentguard

    Do anyone know if Zero deposits have found a way to make their scheme work with the likes of Rentguard? or if not; do anyone know of a similar rent guarantee insurance option is available that will cover the Landlord if no deposit has been taken?

    iI Zero deposit have some how met with the criteria of the rent insurance companies, just being rid of he hassle of the legal mess that taking a deposit cause in court is a good reason to use them, and it trumps having no deposit. 

    Regards Kris

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    It comes down to whether including tenants who can't save a deposit or don't want to basically put that money to one side for the duration of the tenancy to get it back at the end but would rather pay a non returnable fee which is the equivalent of a very high interest rate, are the kind of tenants you want. I wouldn't want them.

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